Buying a home is likely the largest financial commitment you will make in your lifetime. Homeownership is incredibly rewarding, but a misstep in the homebuying process can cost you big time.
Educated homebuyers are some of the strongest individuals within the housing market, and I’m here to help empower you before you start your homebuying journey. Below, we’re going to highlight some of the most common mistakes that I’ve seen other homebuyers make so you’re not doomed to repeat them.
Focus on Payment, Not Price
When you begin your homebuying search, it’s understandable that you might be primarily focused on just the price of a home when narrowing down your options to fit your budget. After all, that’s how they’re listed.
However, if you’re only basing your home search on the sales price, you could end up making an expensive mistake. When you’re living in your home after closing, you likely won’t regularly think about the cost of the home, but rather, the cost of your monthly mortgage payment.
It’s important to know that your loan approval doesn’t depend on the sales price of a home. It’s not entirely based on your loan amount, either. Your loan approval is based on that monthly mortgage payment.
So, if a home has high property taxes, homeowners association dues, or other associated costs, then that home could push you beyond your budget—even if the price tag is within the pre-approval limit that the lender gave you.
My advice is to check with your lender before you submit an offer to make sure that the associated monthly payment works for your loan.
Don’t Put Your Closing At Risk
Buying a home is an incredibly exciting and busy process. For many, it can feel like turning the page to a new chapter within their lives. However, that excitement mixed with a little bit of irresponsibility can kill the whole deal.
If you or someone you know is in the process of buying a home, it’s paramount that they avoid these actions without first consulting a lender:
Change jobs
Quit your job
Add money to your bank account outside of your regular pay check—especially if it’s cash
Take on new debt by opening a new credit card or making a large purchase, such as a car
Quit paying existing debts
Co-sign on another loan
Spend the money set aside for your down payment and closing costs
Typically, closings take roughly 30 days once your offer has been accepted. A good rule of thumb to follow once you’re pre-approved, and especially once you’re under contract, is to steer clear of any major changes.
Keep In Mind the Costs Associated With Buying a Home
When you think about what it costs to buy a home, are you looking beyond just the down payment and monthly mortgage payments that follow? The down payment, which can be as little as 0-5% of the home’s purchase price, is typically the largest sum that buyers have to pay during the closing process. However, there are three other common fees that must be paid.
To put a home under contract, you’ll provide an earnest money deposit. This is to show the seller that you’re a serious buyer and are proceeding in good faith to buy the home. This deposit can range from several hundred to several thousand dollars. This actual amount that you pay for your earnest money deposit depends on the price of the home you’re buying and what’s customary in your area, so always be sure to check!
We’ve already touched on the fact that buying a home is expensive. With the financial commitment, you want to make sure that your home is in good shape when you move in to avoid any serious repairs or any other issues that you don’t want to deal with. Although it’s not required, it’s highly encouraged to order a home inspection prior to your closing date. Inspections typically cost at least $500 and potentially more depending on your area and the size of your home.
Finally, to finalize your home purchase, you’ll have to pay closing costs. Your closing costs cover everything from lender & title company fees to setting up your escrow account for taxes and insurance payments. Depending on your state and the cost of the home you’re purchasing, closing costs will range from 2-5% of the sale price.
You can always ask the seller to pay some of these fees on your behalf, but not all of them. Speak with your lender early on in your homebuying process to gain a full understanding of the total cost of your home in order to be fully prepared when your closing date comes.
If you don’t have a lender that you trust, don’t fret! I’m licensed in more than 25 states and would love to help you out. Feel free to follow this link to get connected with a member of my team.